Flashback: Hank Paulson Calling for Benefit Cutbacks, an Older Retirement Age and Other Attacks on the Social Security System

Hank Paulson — the guy who as Treasury Secretary under President George W. Bush, helped engineer the real estate bubble that brought the economy to its knees, and who then engineered the sweet deal that helped his former company, Goldman Sachs, come out of the crisis as the nation’s biggest bank, fattened by tens of billions of taxpayer bailout dollars, calling for its privatization — is calling for benefit cutbacks, an older retirement age and other attacks on the system.

Boo! The Scary, Scary Social Security ‘Crisis’ is Back!

March 25, 2010

The Public Record - Get ready kids. It’s time for more scare stories about Social Security.

The New York Times weighed in Wednesday with a dire warning that this year, six years ahead of what had been predicted only a few years ago, the Social Security system would be paying out more in benefits than it takes in from the payroll tax. The reason for this earlier-than-anticipated event is the Great Recession, the paper explained.

Well yeah. If you were 62, or 65, and you had lost your job, with no likelihood of its coming back, wouldn’t you, once your unemployment checks ran out, opt to start your retirement earlier than planned, so you’d at least have some money coming in each month?

Oh, and with 10 percent of the work force currently unemployed (actually close to 21 percent if you count the people who have given up looking for a nonexistent job, and those who have taken some low-paid part-time work out of desperation), there is a lot less money being paid into the Social Security Trust Fund.

So with beneficiaries rising faster than anticipated, and the total national payroll in sharp decline, of course things have gone negative for Social Security earlier than originally anticipated.

So what to do about it?

Well Hank Paulson, the guy who as Treasury Secretary under President George W. Bush, helped engineer the real estate bubble that brought the economy to its knees, and who then engineered the sweet deal that helped his former company, Goldman Sachs, come out of the crisis as the nation’s biggest bank, fattened by tens of billions of taxpayer bailout dollars, and of course Peter Peterson, the former ad exec turned self-described economic guru who has been a perpetual doomsayer about Social Security, calling for its privatization, are both calling for benefit cutbacks, an older retirement age and other attacks on the system.

But really, what’s the crisis?

Sure a wave of Baby Boomers is about to start retiring next year (actually for those born first, in 1946, who decided to retire early at age 62, Baby Boomer retirement began in 2008), but that’s a demographic wave that will eventually pass. In the meantime, financing the benefits for Baby Boomer retireees simply means that current workers–the Baby Boomers’ children and grandchildren–will have to pay more in payroll taxes. Or–and this is what has people like Paulson and Peterson scared–Baby Boomers and their allies among younger workers, may decide to use their unprecedented electoral clout to take those extra tax payments not out of younger workers, but out of their employers.

There is, after all, no legal, theoretical or even mystical reason why the Social Security payroll tax should be split 50/50, with half being paid by the worker, and half by the employer. It could easily be a 40/60 split, with the employer paying 50 percent more than the worker, or even a 30/70 split. That is a political question.

Likewise, there is no reason on earth why the payroll tax should be set at the same percentage rate for all income levels, as it is now, instead of progressively calculated, so that high-income workers would pay a higher percentage of income into the fund than low-income workers.

And finally, there is no reason why the income subject to the payroll tax (the FICA tax on your W-2 statement) should be capped (currently at $106,800), or why investment income should be exempt.

The so-called Social Security funding “crisis,” which has Republicans and many Democrats warning of the system’s looming “insolvency” as though Social Security were just another AIG, could be solved simply by just eliminating the income cap, and taxing investment income.

Oh, but the conservatives wail, if we raise the payroll tax, America will become uncompetitive, and our economy will collapse.

How then to explain Germany, where social security as a percentage of GDP is much greater than in the US (40 percent of Germany’s adult population receive some form of government income, whether in the form of retirement payments, unemployment compensation or disability payments–far higher than in the US)? Despite its high social welfare budget, and its high wages, Germany is the second-largest exporter in the world after China, and despite Germany’s being a huge importer of goods and services, second only to the US, overall, Germany is a net exporter. Go figure.

Clearly, the problem with America’s economy is not high social security costs, and the “crisis” facing Social Security is not that it is going to “go bankrupt.” It is simply that the corporate interests in America, and the wealthy, don’t want to have to pay for the system. They want the lion’s share of the funding to be paid by ordinary workers and the poor.

The political game being played by corporate interests, Republicans, conservative Democrats, and by the corporate media, is to pretend that Social Security is just another pension system–underfunded, overburdened, and in need of downsizing. They insist the only solution is cutting benefits, raising the retirement age, and privatizing–taking away the guarantee of a monthly benefit check, and replacing it with the “miracle” of the financial markets.

American workers need to reject this campaign of misrepresentation. They need to realize that Social Security is a government income-support program, and that its benefits are not just for the elderly, but are also for the current workers, who are relieved of having to personally care for their parents and grandparents. They need to realize that Social Security is a government program, and that it will be there for them when they want to retire, just as it is available now for today’s retirees.

And they need to realize that there are many ways to finance those current and future benefits besides just raising their own and their employers’ payroll tax payments from the current 7.65 percent each and/or raising the retirement age beyond the current 66/67 level. We need to demand that all Americans pay the payroll tax on all income, with no caps and no exemption for investment income.

At that point, the fake “crisis” will be over, and we can focus on the real crises facing us: the endless wars that our government keeps dragging us into (one advantage Germany has is that it spends only 1 perce of GDP on its military, compared to 5 percent for the US), global climate change, and health care (yeah, they sure didn’t solve that one with the so-called Health Care Reform Act just passed, which will still leave us spending 20 percent of GDP on health care by 2016, up from 17.5 percent this year!).

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